The evasive Virgin

Japan fines company over tax avoidance

Japanese authorities have ordered Virgin Entertainment Japan to pay ¥4.3 billion ($36.7 million) in taxes due on the 2003 sale of its local theater chain to Toho Co.

The Tokyo Regional Taxation Bureau also has slapped Virgin with a $12.8 million penalty for allegedly trying to avoid the taxes by routing the sale via its Swiss arm, Virgin Holdings.

A probe found Virgin Entertainment Japan sold its 60% stake in Virgin Cinemas Japan to Virgin Holdings and allegedly asked all other shareholders to do the same. The 54,000 shares sold for $51.3 million.

Virgin Holdings then sold the shares to Toho for $88 million, clearing a $36.7 million profit.

Investigators uncovered the large mark-up and the fact that Toho paid Virgin Entertainment Japan the $88 million directly. The triangular paper transaction circumvented Japan’s 45% tax on corporate share sales (Switzerland’s is 9.8%).

Due to the New Year’s holiday in Japan, Virgin Japan was unable to comment on the reports.